Located in the heart of a significant array of shipping routes, Malta's strategic position has enabled the country to develop one of the largest and most reputable ship registers in the world offering a variety of international maritime services. The Malta flag is a flag of confidence and a flag of choice and today, also a European flag, in view of the fact that Malta has become a Member State of the European Union.
Benefits of Registration
Vessels registered under the Malta flag qualify for a number of benefits available to them under Maltese law. The Malta flag is an internationally recognized and reputable jurisdiction, which complies with European Union legislation. The Malta flag adheres to International Conventions on safety and security. It is a well-organised and fast registration system, having low registration costs and containing also clear and certain laws relating to mortgages. There are no restrictions on the nationality of the master, officers and crew, or on the sale or transfer of shares of a company owning Maltese ships. Preferential treatment is given to Maltese ships in certain ports. Attractive incentives are given to owners, charterers and financiers of Maltese vessels of over one thousand net tons (NT), these advantages may also extend to smaller vessels.
Eligibility for Registration
Any Maltese or European citizen and any company registered in Malta or in a Member State of the European Union may register a vessel under the Malta flag. Nevertheless, in the case of persons who do not reside in Malta, it is of essence that a registered agent in Malta is appointed. Non-EU citizens may set up a Maltese company and register the vessel in the name of the said Maltese company. Non-EU registered entities may register a vessel in Malta if the registrar-general is satisfied that such entity enjoys legal personality under the laws of the country in which it is established, in which case, such entity should appoint a resident agent in Malta.
All types of vessels may be registered under the Malta flag, including commercial ships, vessels under construction, cruise liners and pleasure yachts. Vessels may be registered in Malta, even whilst they are still being built or equipped and pending their completion. Maltese legislation provides for adequate protection for both financiers and vessel owners. A vessel may need to pass an inspection depending on its age. Vessels which are fifteen years or older but less than twenty years are required to pass an inspection by an authorised flag state inspector before or within one month of provisional registration. Vessels which are twenty years or older but less than twenty-five years are also required to pass an inspection by an authorised flag state inspector prior to provisional registration. Generally, vessels which are older than twenty-five years are not capable of being registered, unless specific approval is granted by the Registrar-General.
Initially, a vessel is registered provisionally in Malta for a period of six months, a period which may be extended; during this period, all documentation required is collected. Once all the documents have been submitted, the vessel will be considered to be permanently registered with the Maltese Registrar of Ships. On demand, a vessel may also be registered by means of an expeditious and straightforward procedure within a timeframe of forty-eight hours from receipt of all the required documentation.
Bareboat Charter Registration
Maltese law provides for bareboat charter registration of Maltese vessels under the Malta flag as well as bareboat charter registration of Maltese vessels under a foreign flag. The notion of bareboat charter registration consists of the compatibility of the two registries insofar as matters regarding title over the vessel, mortgages and encumbrances are governed by the underlying registry, while operation of the vessel falls under the jurisdiction of the bareboat charter registry. Within these parameters, bareboat charter registered vessels enjoy the same rights and privileges, and have the same obligations, as any other vessels registered in Malta. A bareboat charter registration continues for the duration of the bareboat charter or until the expiry date of the underlying registration, whichever is the shorter, but in no case for a period exceeding two years. Nonetheless, registration can be extended.
The requirements and registration procedure for bareboat charter registration are similar to a normal registration. Some characteristics of this type of registration include that a ship is bareboat chartered to a body corporate, entity or such other person qualified to own a Maltese ship; the ship is not a Maltese ship, it is registered in a compatible registry but cannot be registered in another bareboat registry. Registration fees and annual tonnage tax for bareboat charter registration are the same as those referred to with respect to normal registration.
Shipping Organisations and Tonnage Tax Ships
A Shipping Organisation qualifies as such if it obtains and maintains a licence from the Registry-General to be able to carry on one or more of the following principal objects: (i) the ownership, operation (under charter or otherwise), administration and management of a registered Maltese ship (or registered under the flag of another state), and all ancillary financial, security and commercial activities in connection therewith; (ii) the holding of shares or other equity interests in entities, whether Maltese or otherwise, established for any of the purposes stated in Maltese law and the carrying on of all ancillary financial, security and commercial activities in connection therewith; (iii) the raising of capital through loans, the issue of guarantees or the issue of securities by the Shipping Organisation when the purpose of such activity is to achieve the objects stated in this article for the Shipping Organisation itself or for other shipping organisations within the same group.
A Shipping Organisation is registered within a matter of hours, on the basis of a power of attorney which is sent by the shareholders to their representatives in Malta. It is not necessary to have a principal place of business located in Malta in respect of such organisations; moreover, there are no restrictions on the sale and transfer of shares or stock of a Maltese shipping company. Nonetheless, the company should have a registered address in Malta.
A Shipping Organisation which is registered and licensed under Maltese law enjoys certain fiscal advantages, in relation to its shipping activities, provided that all relevant registration fees and tonnage taxes are duly paid. A Shipping Organisation may enjoy further benefits if it owns a tonnage tax ship, which is either a ship declared to be so-called by the Minister, or a Community Ship of not less than one thousand net tonnage which is owned entirely, chartered, managed, administered or operated by a shipping organisation.
When a Maltese company acquires a vessel, the acquisition would be VAT neutral if purchased from another European Union State and no VAT will be physically paid in Malta. The VAT is charged and reclaimed on paper within the same VAT return. If proof of VAT relating to the vessel is required, a document may be provided upon request by the VAT department, as proof that the purchase of the vessel has been declared for VAT purposes in Malta. Once the vessel is eventually sold to a third party, VAT will then be charged to the buyer on the consideration and passed on to the VAT department. Instead of being sold to a third party, a vessel may be leased to such third party.
in such a case the owner of the yacht (Lessor) enters into an agreement with the person interested in leasing the yacht (Lessee) and contracts the use of the latter in return for a consideration. At the termination of the lease period, the Lessee may choose to purchase the yacht at a percentage of the original price.
For VAT purposes, the lease of the vessel is a supply of services with the right of deduction of input VAT by the Lessor, where the right of input VAT applies. The supply of services is taxable only with respect to the use of the vessel in European Union territorial waters. Consequently, VAT, which is currently at 18%, is only chargeable on the portion of the lease payments reflecting the presumed stay of the vessel within the European Union territorial waters. For example a sailing boat that is over 24 metres in length is deemed to be used for 30% of the time in the European Union territorial waters and 70% outside such waters. Maltese VAT would be chargeable by the Lessor to the Lessee on 30% of the value of the monthly lease payments.
Registration of Commercial Yachts
Maltese law offers a multitude of advantages to the operation of commercial yachts. Yachts which are in commercial use may be registered as commercial yachts as long as they do not carry cargo and as long as they do not carry more than twelve passengers. The following classes of vessels will be considered for registration as commercial yachts under the Malta flag: (i) yachts in commercial use of not less than 15 metres in length and not more than 24 metres in length; (ii) yachts in commercial use of more than 24 metres in length and less than 500GT; (iii) yachts in commercial use of more than 24 metres in length and 500GT and over but less than 3000GT.
Vessels registered in Malta and owned by licensed Maltese Shipping Organisations may opt to pay an annual tonnage tax instead of tax on income. Moreover, registration costs for commercial yachts are advantageous since the annual registration fee and particularly the tonnage tax fee varies according to the size of the vessel.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.